2 Popular Software Stocks Wall Street Thinks Are Overvalued
The demand for software solutions is expected to continue to increase due to the many remote lifestyles and continued digitization. However, the possibility of aggressive interest rate hikes later this year to counter soaring inflation could lead to a downward trend in the software industry. Investors’ loss of interest in software stocks is evident in iShares Expanded Tech-Software Sector ETFs (VIG) Down 3.3% in the past month and down 17.3% since the start of the year.
According to St. Louis Federal Reserve Chairman James Bullard, interest rates could be raised to 3.5% by the end of the year to curb the current record inflation. Therefore, overvalued software stocks might not be able to withstand such a tight monetary tightening.
Against this backdrop, Wall Street analysts believe popular software stock Everbridge, Inc. (EVBG) and Coupa Software Incorporated (KICK), are overvalued at current price levels and likely to decline further.
Click here to view our Software Industry Report for 2022
Everbridge, Inc. (EVBG)
EVBG operates as a software company that provides enterprise software applications that automate and accelerate organizations’ operational response to critical events in the United States and around the world.
EVBG’s revenue increased 36% year-over-year to $102.83 million for the fourth quarter ended December 31, 2021. However, its total operating expenses increased 15.7 % year over year to reach $83.37 million. In addition, its total current liabilities amounted to $304.33 million for the period ended December 31, 2021, compared to $236.23 million for the period ended December 31, 2020. The total liabilities of the company was $1.02 billion, compared to $708.64 million for the same period.
In terms of before EV/S, EVBG’s 4.94x is 61.2% higher than the industry average of 3.07x. Additionally, its advanced P/S of 4.60x is 41.8% better than the industry average of 3.24x.
Analysts expect EVBG’s EPS to decline 33.3% for the quarter ended June 2022. The stock has lost 25.9% year-to-date to close the trading session in 2022. yesterday at $49.87. Additionally, Wall Street analysts expect the stock to hit $43.70 in the near term, indicating a potential drop of 12.4%.
EVBG POWR Rankings reflect his poor outlook. It has an overall rating of D, indicating a sale. POWR ratings rate stocks on 118 different factors, each with its own weighting.
Also, the stock has a D rating for stability and quality. Click on here to access additional POWR ratings for EVBG (momentum, growth, value and sentiment). It is ranked No. 21 out of 24 stocks in the F rating Software – SAAS industry.
Coupa Software Embedded (KICK)
COUP provides a cloud-based enterprise expense management platform that connects its customers with vendors around the world. The company provides visibility into how businesses spend money, optimizes supply chains, manages cash, and enables businesses to realize savings that drive profitability.
COUP’s total revenue increased 18.2% year-over-year to $193.30 million for the fourth quarter ended January 31, 2022. However, its net loss was 96. $01 million, compared to a loss of $61.39 million in the prior period. Its loss per share was $1.29, compared to a loss per share of $0.85 a year ago. The company’s total liabilities were $2.29 billion for the period ended January 31, 2022, compared to $2.06 billion for the period ended January 31, 2021.
In terms of forward EV/S, COUP’s 9.63x is 214.1% better than the industry average of 3.07x. Additionally, its forward P/S of 8.87x is above the 3.24x industry average of 173.6%.
Analysts expect COUP’s EPS to fall 80.8% for the quarter ended July 2022. The stock has lost 37.2% year-to-date to close the trading session of yesterday at $99.27. Additionally, Wall Street analysts expect the stock to hit $95.61 in the near term, indicating a potential drop of 3.7%.
COUP’s POWR ratings reflect its weak outlook. The stock has an overall D rating, which equates to a sell in our proprietary rating system. Plus, it has a D rating for stability, feeling, and quality.
We also rated it for growth, value and momentum. Click on here to access all the odds of the COUP. COUP is ranked No. 49 out of 61 stocks in the D rating Software – Enterprise industry.
EVBG shares remained unchanged in after-hours trading on Wednesday. Year-to-date, EVBG is down -28.46%, compared to a -6.08% rise in the benchmark S&P 500 over the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master’s degree in economics, she helps investors make informed investment decisions through her insightful commentary. After…